Friday, June 1, 2012

Multiple offers make a comeback in real estate.

Guess what’s back in the real estate vocabulary for many neighborhoods and communities?

Multiple offers.

Not everywhere, and not in every price range, but for houses that are priced properly and in the right location, it’s war — or maybe just a semi-polite skirmish.

The hint that multiple offers are returning can be found in the numbers. If, as Prudential Fox & Roach associate broker Mark Wade pointed out, you are looking for anything under $200,000 in Old City Philadelphia, you are out of luck.

This is almost a guarantee of multiple bids if a $185,000 condo unit comes up for sale. Top advice for buyers in these situations: Unless you are paying cash, your offer must be accompanied by a preapproval letter from a lender for an amount higher than the asking price.

No seller is going to wait for you to shop for a mortgage if there are preapproved buyers in the competition already. Buyers who really want a house need to take decisive action.
"Snooze and you lose," said Diane Williams of Weichert Realtors in Blue Bell.

Multiple bids are a sign of reduced inventory in the price range that’s popular for a location. In many instances, however, it may be that the house for sale is, shall we say, to die for.

Gary and Cindi Patrick’s meticulously maintained house in Franconia Township just outside Harleysville had two offers, and sold within 16 days of listing for $410,000, $2,000 below asking price.

The Patricks, who lived in the house on Dorchester Lane for more than 13 years, are retiring and moving to Florida.
"Our experience with the sale of our home was rather exciting," Cindi said. She added that she had concerns with selling in this market, but had attempted to keep the house updated and well-maintained, "which we feel paid off when shown."

She said their choice of neutral colors seemed to appeal to potential buyers "in that they can easily picture themselves living here."

"As a result, we felt we would attract interest. However, we were pleasantly surprised to have as much interest as we did, and to receive an immediate offer," she said.
Center City agent Jeff Block of Prudential Fox & Roach said he was handling a multiple offer at the moment, with "the prevailing buyer still to be determined."
He also has four other multiple-offer listings already sold and several more under agreement of sale.

"The market is becoming really balanced, which is a great sign," Block said. "We had virtually no multiple offers over the past several years, since we were in a solid buyers’ market."
Block said there was a lot of interest in homes priced well for the market.
"And in this market, depending on the situation and pricing, multiple offers don’t necessarily mean a home sells for at or over full asking price," he said, confirming the Patricks’ experience.

What it does mean, Block said, is that "the market is establishing the proper level for where that home should be."

The result: Sellers know they are getting the most the market will bear for their homes, while buyers know they are buying into a market with generally lower pricing and "simply ridiculous interest rates," he said. Mortgage giant Freddie Mac said Thursday that 30-year fixed rates now average 3.75 percent.

Remember, however, that low interest rates are attracting owners who want to refinance mortgages rather than those who are buying houses. The Mortgage Bankers Association’s latest data show refis accounting for more than 76 percent of home-loan originations.
While multiple offers can be a gauge of an improving market, they are as angst-ridden as any transaction, and often result in hurt feelings or even worse.

"It’s often tricky to finesse this kind of situation and keep everyone happy, or at least feeling like they were treated fairly — and I think ‘treated fairly’ is the most important thing here," said Ruth Feldman, an agent with Weichert Realtor McCarthy Associates in northwest Philadelphia.
If Feldman is representing the buyer, and she knows there already is an offer or offers submitted for the property, "then I counsel my buyer to make his or her first offer the highest and best one," she said.

Highest and best means "price along with perhaps better terms, more on deposit, quicker settlement, anything that we feel might benefit the seller, and not to expect a counter, as the seller will likely choose the best offer and reject the others," Feldman said.
"At least that way if they should lose the bidding war, their disappointment is mitigated by the fact that they tried their best," she added.
By the way, the listing agent must tell the buyer or his or her agent of the other offers, Feldman said.

What about sellers? If Feldman is representing a seller, she suggests being fair to all buyers by, for example, setting a time limit on when offers will be presented and reviewed, while also encouraging more offers.

"If I know an agent who had an interested buyer, I would proactively call that agent or agents to say we had offers in and will be presenting at a certain day/time to give them a chance to compete," Feldman said.

She then would make sure that the seller abided by the timeline — no foot-dragging while waiting for even more offers that might or might not materialize.

Feldman also would discourage a "go back to everyone and ask for their highest and best" scenario, unless all of the offers are exactly the same, which she says is unlikely.
"Buyers often don’t like that kind of scenario, and might just withdraw their offer rather than continue to compete," she said. "I would counsel the seller to instead choose the best all-around offer," since price and terms and buyer’s financial qualifications all are important — "and to not get greedy here or he/she may be left with no offers."

"Of course, the seller has the final say in how to proceed and what they want to do," Feldman said, because the listing agent can provide only good counsel and his or her best advice.

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